News
Issue #2003 - 03 (January 2003)
(Updated Jan. 30, 2003)

MARKET OUTLOOK & TRENDS

Carrier Market Outlook - Some Hope But Let Us Not get Excited

1. Nokia - Better Than Expected
Nokia , the world's largest mobile phone maker, rang in better-than-expected profits for the fourth quarter but predicted sluggish first-quarter sales and profits as consumers restrain spending. 
Nokia posted on Thursday pro forma earnings of 28 cents (0.26 euros) per share in the fourth quarter, above the 25 cent to 27 cent target it had set in December and better than the average in a Reuters poll of analysts. Earnings in the fourth quarter of 2001 were 26 cents per share. 

Net sales came in at the low end of the company's forecast, up 1 percent to $9.5 billion year over year. Mobile phone sales were flat year over year at $7.2 billion, partly due to weaker sales in the Americas. 

Nokia said that it expects for the first three months of 2003 to reach pro forma earnings per share of 16 cents to 20 cents, versus 20 cents a year ago. 

"I think there'll be some degree of relief here that their market share doesn't appear to have been eroded. It's a solid set of results and the guidance looks conservative,'' said analyst Jonathan Philip of Sarasin Investment Management, which holds Nokia. "Solid rather than spectacular would be my summary of the performance,'' he said. 

Nokia did not give a precise forecast for first-quarter sales but said it expected net sales growth for the group to be lower than the zero to 9 percent growth estimated for the handset unit, which is Nokia's main business. 

"Economies are in a very slow growth state at the moment...so conditions do remain challenging also in 2003, and this really seems to be affecting the way the year will start,'' Chief Executive Jorma Ollila said at a news conference. "That gives us reason to be cautions in our view on how we look at the first quarter.'' 

Nokia said it expected second-quarter sales to be higher than the first-quarter estimate. 

Handset and network equipment sales slumped last year as cash-strapped telecommunications operators delayed upgrading to higher-speed networks and consumers were reluctant to spend money on new handsets, such as color-screen devices, as economic growth slowed worldwide. 

Nokia hopes to boost demand and keep ahead of its fierce competition by launching a record number of stylish phones. But sales of the latest color-screen models were not as good as expected as consumers preferred budget phones. 

Nokia, which has double the market share in global handset sales compared with its nearest rival Motorola, reiterated that it expected industry-wide unit mobile phone sales to grow 10 percent or more from 405 million units in 2002. 

That exceeds Wednesday's forecast from Motorola, the U.S. wireless company, at 430 million to 440 million units for 2003. 

Nokia also expects the average sales price of mobile phones to rise after bottoming out in the fourth quarter of 2002 and first quarter of this year, Ollila said. 

Nokia said its global handset market share grew to 38 percent in 2002, moving it closer to its target of 40 percent. 

2. Qualcomm reports strong first quarter 
Qualcomm yesterday said that record demand for its wireless telephone technology helped it beat expected quarterly financial targets. The company reported net income of $241.3 million, or 30 cents per share, for its fiscal first quarter, a 73 percent jump over last year's first-quarter profit of $139.2 million, or 17 cents per share. Sales grew 57 percent to $1.1 billion for the quarter ended December 29. Qualcomm also upped its expectations for 2003 based on the company's last quarter. The company said much of its growth was driven by increased global demand for network equipment using the WCDMA standard.

3. Virgin Mobile reports strong sales
Britain's fifth biggest mobile phone operator, Virgin Mobile, says it has made its first annual profit after its best ever Christmas sales period. 

Virgin Mobile is proving to be one of the most formidable companies in the Virgin empire. The network says it recruited 370,530 new customers in the fourth quarter of 2002, a 40% increase on the same period last year. By the end of December it had 2.4 million customers, which Virgin Mobile says gives it a UK market share of 4.6%. 

Although detailed accounts have yet to be published, the company says it made an annual profit of about £16m. But that figure is likely to contested by Virgin's larger rivals, such as Vodafone and mmO2, as it does not take into account costs such as interest and tax. 

Because Virgin Mobile is a private business, it does not have to publish its figures to the same detail as its publicly-quoted competitors. 'Pleasantly surprised' 

Virgin spokesman Steven Day said Thursday's figures showed Virgin, which launched three years ago, was the fastest growing mobile network in the world. 

He was also bullish about the state of the UK mobile market, which has taken a beating over the past year. "We were quite pleasantly surprised by the fourth quarter, to be quite frank. 

Virgin Mobile is jointly owned by Sir Richard Branson's Virgin Group and Deutsche Telekom's T-Mobile. 

Commenting on Thursday's figures, Sir Richard said: "2002 was the best year in Virgin Mobile's history; the year in which it truly proved to be the great success we always knew it would be. It was the year we acquired our two-millionth customer; it was the year we went into profit; and it was the year our turnover reached £290m. "2003 is going to be even better - by the end of the year we will have more than three million customers, and a turnover in excess of £400m. 

Source: Reuters and BBC

MobileInfo Comments and Advisory: There is some good news in these figures across the Atlantic and on this side of the Atlantic. This is only part of the story. Out of the three vendors, one is a handset manufacturer, the second is a manufacturer of components feeding the network suppliers and the third is an upcoming operator. Can we make a trend out of three points on three different charts? Perhaps not.  We can only say that we may have bottomed out and light may be at the end of the tunnel. As we come out of this tunnel, we may have to shed a few compartments of this train traveling at a slow speed. Many of the passengers in those compartments may have left for better seats in other compartments. 

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